Democratic senators condemn move to block consumer bureau nominee

WASHINGTON (Reuters) - Three Democratic senators defended the new consumer watchdog on Wednesday and said Republicans who have vowed to block President Barack Obama’s choice to lead the bureau would hinder its work protecting consumers from financial scams.

Senators Jack Reed of Rhode Island, Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts said Republicans oppose Richard Cordray’s nomination to lead the Consumer Financial Protection Bureau for political reasons and called for them to allow a confirmation vote.

The three serve on the Senate committee that oversees banks and the consumer bureau. Warren set up the consumer bureau after it was created by the 2010 Dodd-Frank financial oversight law.

Obama recently nominated Cordray to a full term at the helm of the bureau, after using a procedural maneuver to name him as the head in January 2012.

“I‘m new to the Senate, and I confess I don’t get this,” said Warren, who was elected in November. “We shouldn’t have a system where more political stalemates just create more bad government.”

In response to the nomination, 43 Republican senators vowed to block Cordray’s confirmation unless the Obama administration agreed to change the CFPB’s structure and funding.

“I‘m new to the Senate, and I confess I don’t get this,” said Warren, who was elected in November. “We shouldn’t have a system where more political stalemates just create more bad government.”

The CFPB has been controversial since before it opened in July 2011. Republicans and business groups say the bureau has too much authority over a wide swath of financial products, including mortgages, credit cards and student loans, and too little oversight from lawmakers.

The Republican senators have said they would not confirm Cordray for a full term until Obama agrees to replace the director with a bipartisan board, subject the bureau to congressional appropriations rather than funding it through the Federal Reserve, and allow federal bank regulators to verify that any new consumer bureau rules would not harm banks’ safety.

They had made the same demands in a 2011 letter.

Although an appeals court ruling last month on recess appointments did not directly name Cordray, he was appointed via the same procedure and experts said the same logic could be used to challenge his appointment.

The appeals court ruling found that certain recess appointments were unconstitutional because lawmakers were not technically in recess, but were meeting in short sessions with only a few members present.

Democrats have shown no signs of giving ground on the consumer bureau. They say the CFPB, like other bank regulators, must be funded independently to prevent its budget from becoming a political football.

Reed said the bureau’s rules already are overseen by a group of regulators called the Financial Stability Oversight Council, and he said structural changes are not needed because the agency has been effective so far.

In addition, Warren said Cordray’s confirmation would maintain continuity for the industry. Dodd-Frank required the bureau to write a slate of rules regulating mortgages and other products. If a court said Cordray’s recess appointment was unconstitutional, many of those rules could be thrown out, experts say.

Many people in the financial services industry have been complimentary of Cordray since he took over at the consumer bureau, saying he has been accessible and that the CFPB’s rules have incorporated feedback from both industry and consumer groups.

“No one in the country, no one in the Senate that I’ve heard of has said that Rich Cordray is not qualified for this job,” Brown said.

“Imagine the precedent that sets for the Senate. If you don’t like an agency, if you don’t like the laws that created an agency...you’re going to refuse to confirm someone in the future.” he said.

Republicans say they do not object to Cordray personally but that they want to see changes at the bureau before they confirm anyone as its leader.